Political correspondent

Finance Minister Mathias Cormann: If the budget spending cuts are not passed then "the only alternative to balance the books is to increase taxes". Photo: Wolter Peeters

The federal government is digging in over unpopular cuts in the budget, with cabinet ministers warning other savings measures will be found if a compromise cannot be reached with the opposition and Senate crossbench.

Finance Minister Mathias Cormann said on Sunday that if the budget spending cuts and savings measures, including the $7 GP co-payment, the rise in fuel excise and changes to university fees, were not passed then "the only alternative to balance the books is to increase taxes".

Education Minister Christopher Pyne said universities could face a "worst case" scenario of research funding cuts if the Senate did not pass his proposed higher education reforms, which will be introduced to the Parliament on Thursday and include deregulated university fees, cuts to course funding by about 20 per cent and increased interest payments on student loans,

Illustration: Matt Golding.

A third cabinet minister, who asked not to be named, declared "we are not for turning. Nor are we worried" about the political impasse over the Coalition's economic program at this stage of the electoral cycle.

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"We are not fazed by six weeks of fevered speculation on the budget. We are at the beginning of the process not the end of it," the minister said.

"The point is there are consequences to decisions that the Senate makes. We got elected to decide what measures to take, not the Senate, and if the Senate thinks it can manage the budget from the Senate they are wrong."

The hardening of the government's rhetoric comes before a cabinet meeting focused on strategy on Monday, before Parliament resumes on Tuesday and builds on Treasurer Joe Hockey's warning of "emergency action" and Queensland-style austerity about two weeks ago.

In the past month, Mr Hockey has travelled widely to talk to the Senate crossbench amid signs of compromise on some measures and as the government attempts to reset political debate over the budget.

On Sunday, Senator Cormann said there was "no rush to deal with specific structural reforms" because many of these changes would not begin until next July or later.

"Essentially, if we stay on a spending growth trajectory that takes us to 26.5 per cent of the share of GDP when tax revenue on average over the last 20 years was 22.4 per cent of the GDP and [if] you don't want to balance the books by reducing spending, the only alternative to balance the books is to increase taxes.

"What is Bill Shorten's plan? Is he planning to increase taxes in order to make up for Labor's unsustainable spending growth trajectory?"

Mr Pyne said that if the Commonwealth grant scheme wasn't cut "the only area the government can reduce spending is in areas like research".

He said the government wanted university students to pay for 50 per cent of their education costs – they currently pay 40 per cent – and that "we're not asking for their left kidney to be donated".

Labor's finance spokesman Tony Burke seized on government warnings of higher taxes as proof of what they were planning in the future.

"Mathias Cormann has been their most disciplined performer and he wouldn't say this unless Tony Abbott seriously had plans to introduce a raft of new taxes," he told ABC radio on Monday.

Mr Burke described the tax threat as "more about extortion than it is about governing".

"This bizarre game where they're saying if you don't vote for an unfair budget, we'll come up with something even more unfair," he said.

The government may also swiftly again attempt to repeal the mining tax, a move that was stymied in the last sitting of Parliament because of the Palmer United Party's desire to keep $10 billion in spending measures including the Schoolkids bonus.

Government sources insist that the bill to repeal the mining tax will not be split to allow the tax to be abolished but the spending measures retained.

Mr Palmer's senators met at the weekend to discuss their budget position.

332 comments

You don't need to raise taxes, just start collecting them from those who should be paying them! Get rid of the loopholes that allow the rich to move income offshore, hide it in family trusts and the biggest rort of all negative gearing.

Commenter

fred

Date and time

August 25, 2014, 4:49AM

Exactly. Stop notated leases - why should only SOME people get a tax break to drive to work? Sort out super tax avoidance for the wealthy too...and STOP asking the Opposition to give you the answers Tony/Joe/Christopher - after all, YOU are in government not the Opposition and you spent a lot of time telling the electorate YOU knew how to fix things as opposed to Labor. Do your job - fairly and with a long term view of what's best for ALL.

Commenter

JM

Date and time

August 25, 2014, 5:45AM

Precisely, our problem is revenue more than it is expenditure. It's time to consider the instruments not considered in Budget Mk1. Super concessions, FBT, negative gearing and losing that ridiculous PPL. There is no need to hurt the poor, a great deal of who are LNP voters.

Commenter

DrPhil

Date and time

August 25, 2014, 5:46AM

Still no news from Joe Hockey on how the chronically ill are going to afford the co-payments on multiple GP visits, multiple diagnostic tests and multiple prescriptions. Their situation will be dire if this gets through as is.

Commenter

Sal

Date and time

August 25, 2014, 5:51AM

"...and losing that ridiculous PPL".@DrPhil, the PPL scheme is not part of the budget, and has not even been introduced.Maybe try and get some facts, before showing us all just how much you don't know.

Commenter

The Other Guy

Location

Geelong

Date and time

August 25, 2014, 5:55AM

You don't even need to go that far. Just wind back Howard's middle class welfare handouts tot he self entitle LNP supporters and any fiscal emergency is solved. Why can't those who accepted Howard's bribes make a small sacrifice for this country!

Commenter

gof

Location

HanCity

Date and time

August 25, 2014, 6:00AM

A no surprises government.

Commenter

Matt

Date and time

August 25, 2014, 6:07AM

Get rid of the loopholes

The Age Pension assets test....

Who has decided to be exempted in our so-called democratic society in which the will of the people is the bulwark of the system ?????

If you really want to keep them honest "DIRECT DEMOCRACY" is the best tool.

If you know a better tool let us know.

Commenter

half

Location

Sydney

Date and time

August 25, 2014, 6:08AM

Hilarious, the LNP chorus of "what does Bill Shorten propose to do" to fix the imaginary budget crisis.

Shorten must be chuffed to know Abbott needs his advice (because the rest of his cronies only know how to take money from pensioners and the sick) but equally, he must be very amused that Abbott needs help to fix his personal fantasy, the Big Green Budget Bogey that lurks at the bottom of LNP fairyland and has the LNP in a fever of fear.

Obviously, now we know Murdoch's papers have tanked, we can assume that Abbott has been ordered to drive money to Murdoch, by starting a war, or starting a Muslim uproar, or getting the bogans frothing with fear at the prospect of ... new taxes (in addition to the recent New Taxes).

Crikey, this will go down as the Marathon Budget. Still going, after 3 years, when Abbott is kicked out.

One term Toney, One Budget Toney

Commenter

Axis

Date and time

August 25, 2014, 6:12AM

The crossbenchers should say to Cormann that they don't pay ransom or heed blackmail to terrorists....because that's exactly what this govt is....just a filthy bunch of terrorists waging against the Australian people making threats.